Which of the following bonds (of equal maturity) would have the largest risk premium?
A) Australian Treasury bonds.
B) The bonds of a financially stable corporation.
C) Junk bonds.
D) U.S. government bonds.
E) Bonds rated AAA by Moody's.

Question

Quizplus · Accepted Answer

Junk bonds are typically issued by companies with poor credit ratings and high risk of default, making them the riskiest of the options listed. As a result, they would have the largest risk premium. Australian Treasury bonds, U.S. government bonds, and AAA-rated bonds are all considered safe investments with low risk premiums. The bonds of a financially stable corporation would have a lower risk premium than junk bonds, but still a higher risk premium than government bonds or high-quality corporate bonds.

Which of the Following Bonds (Of Equal Maturity) Would Have